Delta Hedging in Financial Engineering: Towards a Model-Free Approach
Delta hedging, which plays a crucial rôle in modern financial engineering, is a tracking control design for a "risk-free" management. We utilize the existence of trends in financial time series (Fliess M., Join C.: A mathematical proof of the existence of trends in financial time series, Proc. Int. Conf. Systems Theory: Modelling, Analysis and Control, Fes, 2009. Online: http://hal.inria.fr/inria-00352834/en/) in order to propose a model-free setting for delta hedging. It avoids most of the shortcomings encountered with the now classic Black-Scholes-Merton framework. Several convincing computer simulations are presented. Some of them are dealing with abrupt changes, i.e., jumps.
|Date of creation:||23 Jun 2010|
|Date of revision:|
|Publication status:||Published - Presented, 18th Mediterranean Conference on Control and Automation, MED'10, 2010, Marrakech, Morocco|
|Note:||View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/inria-00479824/en/|
|Contact details of provider:|| Web page: http://hal.archives-ouvertes.fr/ |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Michel Fliess & Cédric Join & Mamadou Mboup, 2010. "Algebraic change-point detection," Post-Print inria-00439226, HAL.
- Michel Fliess & C\'edric Join, 2009. "A mathematical proof of the existence of trends in financial time series," Papers 0901.1945, arXiv.org.
- Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
When requesting a correction, please mention this item's handle: RePEc:hal:journl:inria-00479824. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD)
If references are entirely missing, you can add them using this form.